Roman walls remaining in countryside

14 Dec 2022

Focussing institutional attention

Harold Hutchinson

Managing Director, Alternative Energy at Investec

Recently, Harold had the opportunity to address the Regulatory Policy Institute Annual Conference at Lady Margaret Hall, University of Oxford. He spoke on the topic of emergent risk and economic policy. Today’s blog summarises some of his thoughts in non-technical terms.

 

At first glance, the Belfast riots in 1969, the Challenger space shuttle explosion in 1986, and the Global Financial Crisis of 2008 do not appear to have much in common, beyond the tragic loss of lives and livelihoods associated with these events. However, on closer inspection, there is a deep connection. They show ‘tipping points’ in action. Routines are unexpectedly disrupted; political, technological, or financial systems collapse.

Are we inevitably doomed to be mere observers of such denouements?  To avoid this dismal conclusion, we need to build institutional arrangements that pay broad attention to developments lying beyond our immediate preoccupations, and which have respect for networks that may be only partially visible or understood. History provides examples to help us.

Consider the Roman fort. A part of its infrastructure consisted of a watchtower (the specula), specifically designed to ensure a different view to that available from within the fort itself. By construction, it allowed a wide-lens, high-level view, and prevented distraction through its positioning away from the hustle and bustle of fort life. Despite this, it remained integrated into the main fort arteries, permitting rapid alerts to the military command in the main fort, when relevant.

That structure was half the story. To fulfil its purpose also required a culture of vigilance and teamwork from the guards on duty. Their experience, accumulated over time, was integral to the effectiveness of the endeavour. This was no job for novices – it was only trained and veteran eyes that could discern possible patterns of concern lurking in the darkness.

Together, structure and culture underpinned the right attention to promote fort safety, a primary and worthwhile objective. The arrangement ensured the trust of the broader community. Normal life could continue in the knowledge that assets had been dedicated to looking out for the ‘unseen’.

Together, structure and culture underpinned the right attention to promote fort safety, a primary and worthwhile objective.

Institutional lessons from the past still resonate today – think of the UK’s Meteorological Office, a specula in metaphorical terms, providing society with valuable early warnings on future threats. Modern-day weather centurions enjoy the added advantage of AI algorithms that help to decipher the patterns in the world around us, but the trained human eye remains critical. Could we not usefully extend this weather watchtower to enhance our preparedness for future climate and biodiversity risks?

More generally, a broadly-based level of attention is critical for the working of other institutions throughout our economy, including government departments and private companies. Currently, in too many cabinets and boardrooms, decisions are driven by myopic fads, often dressed up by so-called ‘experts’ who lack the one thing they peddle - real experience - without a proper appreciation of wider context.

Overall, sustained political and corporate attention is built on two pillars - a careful torchlight analysis of what is known, and equally a searchlight alertness to the new or unseen. Insight is the synthesis of these two types of attention. One without the other is simply folly in decision-making, augmenting system risks rather than alleviating them. In today’s world, too often we have the torch on but the searchlight off.

So, need we be doomed by disastrous tipping points? With care, I believe we can avoid at least some of them. The best we can hope for is to build our institutions and cultures in ways that promote sustained attention and avoid distraction. That attention involves both the torchlight and the searchlight. It is as good as it gets, far from Olympian perfection, but providing credible fortification against system risks.

What have the Romans done for us? As well as education, the roads, sanitation, architecture, and a lot more besides, they might just have left us clues about how to organise our institutions more effectively, avoiding at least some disasters along the way.

 

The Regulatory Policy Institute is an independent charitable organisation dedicated to the study of regulation and deregulation. It aims to deepen our understanding of the drivers and impacts, intended and unintended, of a range of public policies. Further details on its work can be found at its website www.rpiresearchgroup.org.

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Disclaimer: The blog does not aim to give investment advice, but is designed to afford relevant longer-term context to investors, encouraging a broad perspective where uncertainty is high and a spirit of learning is important. The views expressed are those of the author, not those of Investec.